4 Basic Materials Stocks Spiking on Big Volume - views

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

From a technical perspective, GDP spiked sharply higher here with heavy upside volume. This stock has been uptrending strong for the last month and change, with shares moving higher from its low of $11.16 to its intraday high of $15.40. During that move, shares of GDP have been consistently making higher lows and higher highs, which is bullish technical price action. That move is now starting to push shares of GDP within range of triggering a major breakout trade. That trade will hit if GDP manages to take out some near-term overhead resistance levels at $16 to its 52-week high at $16.18 with high volume.

Traders should now look for long-biased trades in GDP as long as it's trending above some near-term support levels at $14 or $13.50, and then once it sustains a move or close above those breakout levels with volume that's near or above 787,641 shares. If that breakout hits soon, then GDP will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $20 to $24.

Keep in mind that GDP is set to report earnings on Aug. 6 after the market close. This stock has a great chance to trend into new 52-week-high territory ahead of the quarter. That said, don't expect a bigger move toward $20 or above until after earning if the stock reacts positively to the numbers.

InterOil

InterOil (IOC) is engaged in the exploration and production of oil and gas properties in Papua New Guinea and its surrounding regions. This stock closed up 9.9% at $85.63 in Monday's trading session.

From a technical perspective, IOC exploded higher here right off its 50-day moving average of $78.02 with above-average volume. This move sent shares of IOC into breakout territory, since the stock took out some near-term overhead resistance levels at $79.83 to $84.23. Shares of IOC are now quickly moving within range of triggering another major breakout trade. That trade will hit if IOC manages to take out some key overhead resistance levels at Monday's high of $86.61 and then once it clears more resistance at $89.97 with high volume.

Traders should now look for long-biased trades in IOC as long as it's trending above $85 or $84 and then once it sustains a move or close above those breakout levels with volume that's near or above 706,811 shares. If that breakout hits soon, then IOC will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high at $106.44.

LSB Industries

LSB Industries (LXU) manufactures and sells geothermal and water source heat pumps and air handling products and chemical products. This stock closed up 1.6% at $34.26 in Monday's trading session.

From a technical perspective, LXU trended up modestly higher here right above its 50-day at $32.64 with above-average volume. This move is quickly pushing shares of LXU within range of triggering a major breakout trade. That trade will hit if LXU manages to take out some near-term overhead resistance levels at $34.83 to its 200-day at $35.89 with high volume.

Traders should now look for long-biased trades in LXU as long as it's trending above its 50-day at $32.64 and then once it sustains a move or close above those breakout levels with volume that's near or above 143,675 shares. If that breakout triggers soon, then LXU will set up to re-test or possibly take out its next major overhead resistance levels at $40 to $43.

Keep in mind that LXU is set to report earnings on Aug. 6 after the market close. Look to play this breakout ahead of the quarter if it triggers, and then look for continued upside after earnings as long as the stock reacts positively to the numbers.

Franco-Nevada

Franco-Nevada (FNV) is a gold-focused royalty and stream company with additional interests in platinum group metals, oil and gas and other resource assets. This stock closed up 10.4% at $43.70 in Monday's trading session.

From a technical perspective, FNV jumped higher here and broke out above some near-term overhead resistance at $40.40 with above-average volume. This stock has been uptrending strong for the last month and change, with shares soaring higher from its low of $31.48 to its intraday high of $44. During that move, shares of FNV have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of FNV within range of triggering a near-term breakout trade. That trade will hit if FNV manages to take out some near-term overhead resistance levels at $44.77 to $45.43 with high volume.

Traders should now look for long-biased trades in FNV as long as it's trending above Monday's low of $42 and then once it sustains a move or close above those breakout levels with volume that's near or above 482,563 shares. If that breakout hits soon, then FNV will set up to re-test or possibly take out its next major overhead resistance levels at $48 to $49. Any high-volume move above those levels will then give FNV a chance to tag its next major overhead resistance levels at $55 to $57.

Keep in mind that FNV is set to report earnings on Aug. 7 after the market close. Target those first breakout levels ahead of the quarter and those second levels after the quarter if the stock reacts positively to earnings.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.